Ask an Attorney: Can insurance companies deny coverage because of cannabis?

Q: Can insurance companies deny coverage to someone because they use cannabis or work in the industry?

A: I’ll assume you’re asking about life insurance (and will handle a property-related insurance question in the near future). The short answer is that yes, an insurance company technically can deny life insurance coverage to people who use cannabis, but many, if not most, companies will work with you to provide coverage; your rates just might be higher.

Life insurance policies are contracts, and the insurance company is in business to make a profit on those contracts. During the underwriting process (when your application is being considered), the company is assessing how financially risky it would be to insure you. That’s why insurance companies decline coverage outright (or charge much more for coverage) for individuals who: have certain health conditions (e.g., AIDS, cancer), participate in high-risk professions or activities (e.g., pilots, sky-divers), don’t meet certain income thresholds, or have a criminal record (including DUIs).

How cannabis use figures into the risk equation has been difficult for the life insurance industry to figure out, in part because there isn’t a consensus on the potential negative effects. Cannabis users may take issue with that, but insurance companies do not like to take risks ― particularly without hard data ― and they are going to take their time to respond to changes in the market.

The good news is that most companies are responding to the cultural, legal, and political shift toward cannabis acceptance by providing policies for cannabis users.

However, even among the companies that do provide coverage, there are no one-size- fits-all policies. Factors that a life insurance company will consider include whether you are using cannabis medicinally or recreationally (and, if the former, for what medical condition, as that medical condition may itself bear on insurability), how often you are using cannabis (rarely, occasionally, daily), and perhaps in what form you are using it (edibles versus smoking).

Attorney Christina C.K. Semmer

For example, if you smoke cannabis daily, some companies may insure you at the same rates as they would cigarette smokers, but if you only smoke cannabis a couple times a month, you may be rated as a “non-smoker,” similar to how a company may treat “celebratory cigar” smokers.

This in itself marks a shift in the life insurance industry. My agent informs me that as recently as a couple years ago, any marijuana use would have resulted in “smoker” rates (which can be two to three times higher than “non-smoker” rates).

The important take-away is that how insurance companies treat cannabis use varies. In the next couple years, the industry may arrive at a more standard rating system for cannabis. But for now, you will want to work with an independent agent ― meaning one who sells policies for a number of different insurance companies ― so that you can compare coverage that best suits your circumstances, including your cannabis use.

Ideally, find an agent who has worked with cannabis users before. Let the agent know (1) why you use cannabis; (2) how often; (3) and in what form.

You should be honest with your agent, for several reasons.

First, if the company finds out you were lying during the application process (e.g., you denied cannabis use but your urine and/or blood test revealed otherwise), your application can be rejected on that basis alone. (And, what’s more, any omissions or misrepresentations can be reported to the Medical Information Bureau, which can then alerts other insurance companies.)

Second, and not to sound too doomsday, but if you die within two years of your policy going into effect (the so-called “contestability period” in California), the life insurance company can investigate whether you gave accurate information on your application. If you lied, the company can deny paying your benefits ― even if the cause of death had nothing to do with the misrepresentation on your application. (There are even some circumstances where they might fight paying on your policy because of misrepresentations you made, even if you die after the contestability period.)

Third, your life insurance agent, and the healthcare worker who handles the bloodwork and questionnaire regarding your medical history and drug use, are covered by HIPAA (Health Insurance Portability and Accountability Act) and therefore cannot and will not disclose information about your drug use.

In short, life insurance companies are like any other business―they want to make money. This means that they don’t want to turn down business from the increasing portion of the population that uses cannabis, but they do need to make sure they’re charging you enough to account for any risks that go along with (or may go along with) such cannabis use.

Finally, to the extent your question asks about whether a life insurance company can deny coverage if you work in the cannabis industry, neither I nor my life insurance agent have heard of this. Again, insurance rates can be higher for individuals who work in high-risk professions, so it’s conceivable that a security guard for a dispensary or an armored guard that transports cannabis could have higher rates. But, in general, working in the cannabis industry should not affect your ability to obtain life insurance, nor should it negatively affect your rates.

Disclaimer: This column is solely informational in nature and is not intended as legal advice

Christina Semmer is an employment and business lawyer who counsels employers regardingProposition 64 and workplace drug policies. Ms. Semmer practices law at Wilson TurnerKosmo, LLP, the largest certified women-owned law firm in San Diego.